What is ADES.L's Intrinsic value?

ADES International Holding PLC (ADES.L) Intrinsic Value Analysis

Executive Summary

As of June 17, 2025, ADES International Holding PLC's estimated intrinsic value ranges from $6.40 to $30.64 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $17.60 +42.5%
Discounted Cash Flow (5Y) $6.40 -48.2%
Dividend Discount Model (Multi-Stage) $13.23 +7.1%
Dividend Discount Model (Stable) $30.64 +148.1%

Is ADES International Holding PLC (ADES.L) undervalued or overvalued?

With the current market price at $12.35, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate ADES International Holding PLC's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 2.4% 2.9%
Equity market risk premium 4.8% 5.8%
Adjusted beta 0.73 0.9
Cost of equity 6.0% 8.7%
Cost of debt 8.4% 8.6%
Tax rate 6.7% 13.9%
Debt/Equity ratio 1.41 1.41
After-tax WACC 7.0% 7.9%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $452 (FY12-2020) to $668 (FY12-2030)
  • Net profit margin expansion from 5% to 6%
  • Capital expenditures maintained at approximately 49% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $6 $922M 85.0%
10-Year Growth $18 $1,384M 72.6%
5-Year EBITDA $12 $1,152M 88.0%
10-Year EBITDA $15 $1,276M 70.2%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 9.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.3%
  • Long-term growth rate: 3.0%
  • Fair value: $13.23 (7.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.7% (Low) to 6.0% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $11 to $50
  • Selected fair value: $30.64 (148.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $509M
Enterprise Value $1167M
Trailing P/E 12.92
Forward P/E 17.12
Trailing EV/EBITDA 4.50
Current Dividend Yield 84.45%
Dividend Growth Rate (5Y) -23.66%
Debt-to-Equity Ratio 1.41

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $5.28
Discounted Cash Flow (5Y) 28% $1.60
Dividend Discount Model (Multi-Stage) 22% $2.65
Dividend Discount Model (Stable) 17% $4.60
Weighted Average 100% $15.69

Investment Conclusion

Based on our comprehensive valuation analysis, ADES International Holding PLC's weighted average intrinsic value is $15.69, which is approximately 27.1% above the current market price of $12.35.

Key investment considerations:

  • Strong projected earnings growth (5% to 6% margin)
  • Consistent cash flow generation

Given these factors, we believe ADES International Holding PLC is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.